Economics and Business
Quarterly Reviews
ISSN 2775-9237 (Online)
Published: 15 November 2023
Does Privatisation Improve Financial and Operating Performance of a Firm? The Case of Tanzania Breweries Ltd
Papias Daudi Njaala
Institute of Accountancy Arusha, Tanzania
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10.31014/aior.1992.06.04.540
Pages: 74-94
Keywords: Privatisation, Financial Performance, Operating Performance, State-Owned-Enterprises, SOEs, Performance Metrics
Abstract
Extant theoretical and empirical literature show that profitability, efficiency, capital expenditure, output and dividends improve (increase) after privatisation. However, previous studies showed a mixture of results on employment levels after privatisation: some showing increases and some showing decreases in employment levels after privatisation. Previous studies also showed that leverage levels decrease after privatisation. In this study the author reviewed some literature regarding privatisation initiatives carried out in various countries and their repercussions on financial and operating performance of firms being privatised. He then used the case of Tanzania Breweries Ltd and compared its pre- and post-privatisation performance levels to evaluate whether there was any post-privatisation improvement. The t-test Paired Two Sample for Means available in Data Analysis Tool of Ms Excel was used to calculate pre- and post-privatisation means (averages) and mean differences for selected performance metrics and also for hypotheses testing. The results show that profitability (in terms of return on sales, return on assets and return on equity), operating efficiency (in terms of sales efficiency and net income efficiency), capital expenditure (in terms of capital expenditure to sales), output (in terms of hectolitres produced and real sales), dividend payout (in terms of dividend to sales ratio and dividend per share) and earnings in terms of earnings per share improved (increased) significantly after privatisation. Capital expenditure in terms of capital expenditure to assets increased but there was no strong evidence to support that the increase was attributable to privatisation or it was just by chance. Financial leverage (in terms of debt to assets and debt to equity) and number of employees improved (decreased) significantly after privatisation.
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